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Pension fund’s mortgage securities lawsuit against Goldman is dismissed

Judge rejects credit-crisis related case

A lawsuit co-led by US pension fund the Alabama Retirement Relief System, which alleged investment bank Goldman Sachs tolerated poor mortgage servicing practices at the height of the financial crisis, has been dismissed.
New York District Judge William Pauley said in a ruling yesterday (August 14) that the investors’ allegations were vague and lacked supporting evidence (“conclusory”).
The case, a consolidated shareholder derivative action, was brought by the fund and private investor Michael Brautigam last year.
The plaintiffs had claimed Goldman breached its fiduciary duty when it accepted bailout cash under the Troubled Asset Relief Program then failed to comply with conditions for accepting it.
It comes days after the US Department of Justice said there was no “viable basis” to bring a criminal prosecution against Goldman relating to its subprime mortgage activities.Judge Pauley said the shareholders failed to demonstrate there were “red flags” alerting Goldman directors to broken controls in its mortgage servicing operations.

The suit named 15 current and former Goldman executives and directors as defendants.
Last week, the Securities and Exchange Commission ended a separate civil probe into Goldman relating to $1.3bn of subprime mortgage debt.
Elsewhere, the SEC has said that US bank Wells Fargo & Co will pay a penalty of more than $6.5m to settle charges that it sold complex mortgage-backed instruments during the financial crisis without fully disclosing the risks.
And in further news, the Louisiana Municipal Police Employees’ Retirement System has filed an amended class action against US commercial real estate company Simon Property Group. The fund says the company board deceived shareholders about changes to the company’s incentive plan.